Egypt has secured a 250 million USD loan from the Africa Finance Corporation (AFC) to better prepare for potential shocks, disruptions, or stress that the North African country may face.
Commercial loan to boost the Egyptian economy
As a leading provider of infrastructure financing solutions on the continent, the AFC will provide Egypt with a commercial loan of 250 million USD, in collaboration with the International Islamic Trade Finance Corporation (ITFC), a member of the Islamic Development Bank Group. According to an IFC statement, the loan amount will contribute to addressing Egypt’s immediate priorities and enhancing economic resilience. This assistance will finance the purchase of petroleum products and agricultural commodities, which are essential pillars of Egypt’s economic infrastructure.
The one-year commercial loan will be evenly split between two crucial public entities in Egypt : the Egyptian General Petroleum Corporation (EGPC), which supports the purchase of fuel and petroleum products, and the General Authority for Supply Commodities (GASC). The latter entity is involved in ensuring food and economic security through imports of essential agri-food products such as wheat, corn, vegetable oils, and sugar.
Economic partnership in line with Egypt’s Vision 2030 program
The financing agreement represents a dynamic response to strengthen Africa’s evolving economic resilience. Samaila Zubairu, CEO of AFC, expressed delight in achieving this historic transaction for Egypt. As an economic expert, he emphasized AFC’s commitment to working with strong partners like ITFC to drive financial innovation and transform the African continent by promoting local manufacturing and national value addition of commodities. Zubairu looks forward to pursue the partnership while supporting Egypt’s national program, Vision 2030.
The Egyptian Ministry of Planning and Economic Development recently disclosed that the country’s Gross Domestic Product (GDP) had achieved a growth rate of 2.65 % at constant prices during the current fiscal year 2023-2024. Consequently, the Egyptian economy experienced a slowdown compared to the growth rate of 4.4 % recorded in the previous fiscal year 2022-2023.
The North African country is grappling with economic challenges and its economy requires ongoing support. As evidenced by the recent privatization for 1.9 billion USD of assets sold. While the government persists in undertaking large-scale projects, such as the construction of a new capital, public debt continues to grow.
Egypt is facing an increasingly challenging task of raising funds to repay its external debt. External borrowing has quadrupled over the past eight years to finance initiatives such as:
- New capital projects
- Infrastructure development
- Maintaining an overvalued currency
Few of its major projects generate additional inflows of hard currency. At the same time, foreign investors have added to the difficulties by shunning Egypt and other emerging markets since the start of the war in Ukraine, and global borrowing costs have risen.
Across the country, the rise in prices of subsidized products has made the cost of living unaffordable for many. The sharp drop of the Egyptian pound against the dollar has led to increased competition for the strong currencies needed for foreign goods and the resulting import deficit.
Strengthening economic resilience after the elections
« The International Islamic Trade Finance Corporation is pleased to facilitate this financing for Egypt, reaffirming our commitment to supporting the economic resilience, growth, and stability of our member countries. Our collaboration with the AFC, a highly respected institution, on this historic transaction, demonstrates the strength and power of multilateral financial institutions coming together to address Africa’s economic challenges », said Hani Salem Sonbol, CEO of ITFC.
The AFC and ITFC have a successful common experience in the field of Islamic finance, having previously provided a 50 million USD loan to Egypt and a 25 million USD loan to Senegal in November 2022. By combining expertise and resources, this initiative is expected to impact the Egyptian economic landscape, enhancing its resilience and paving the way for ongoing progress.
